Welcome to reThinkable – my weekly newsletter where I share actionable insights to build a wealthy healthy life.

Estimated read time: 2 minutes and 50 seconds

Good morning! I’ve finally returned home from Ecuador and Mexico. I took a short writing break while traveling, but now we’re back to our regular schedule!

While in Mexico, I received an email from one of our fellow readers.

Actually, we constantly get this question…

Can you save too much money? 

Given I have something exciting to share with you below, I thought now would be a good time to address this.

Here’s the TLDR:

It depends on what you plan to do with that money.

Of course, it’s a bit more nuanced than that…

So, let me go over a couple of things to make sure you’re not saving too little or too much.

💭 What’s your number?

Like I always say, personal finance is personal:

Maybe you’re like me and plan to retire waaaaayyy before 70

Maybe you’re fine working until 70 but plan to live a simpler lifestyle

Or maybe you want to live lavishly after you retire

In any scenario, your savings number will vary significantly. However, there is a general savings baseline that most people should aim for, regardless for their goal.

For instance, Fidelity provides saving targets by age if you plan to retire by 67ish and want to maintain the same lifestyle you had before.

Since most people plan to retire around this age, it’s a solid starting baseline.

If you’re in your 30s earning $65,000 a year, you should aim to have $65,000 saved by your 40th birthday. As your income grows, your savings should too.

But remember, these numbers are just a baseline.

Set these as your initial savings goals to make sure you’re on track to retire at the typical age. From here, you can tweak the numbers and calculations based on what you want.

It could be more, it could be less.

PS: If you’re interested in learning how to tweak your saving number based on your life goals, let me know by replying to this email and I’ll write about it in a future issue.

🔅 The balancing act

Setting a goal is easy, consistently sticking to it for the long haul is hard.

Everything you do to achieve a goal involves a tradeoff between your present-self and your future-self (i.e. your present-self might not be too happy with all the sacrifices you’re making).

Here are 2 ways to strike a balance when it comes to saving.

1. Use a Savings Operating System

If you’ve followed me for a while now (aka you’re an OG), you probably used my old Savings Tracker. While it was helpful at the time, I’ve completely overhauled it to be 5x more effective.

Say goodbye to the old Savings Tracker

Say hello to the new Savings Operating System (free).

I’ve made major updates, including a 5-step savings plan and a 10-minute video tutorial that walks you through how to use it.

2. Accelerate Your Timeline

Saving is a key part of the equation, but you need to invest your money to accelerate your timeline for achieving that goal.

Here’s an optimal investing strategy to help you do that with any excess savings:

Step 1: Contribute only up to the employer’s match in your 401(k) to take advantage of the free money. Don’t contribute more than the match.

Step 2: If you have a Health Savings Account (HSA), max out your HSA for the rare triple tax advantages. Contributions are pre-tax, the money grows tax-free, and money withdrawn for qualified medical expenses are tax-free.

Step 3: Max out your Roth IRA for its tax advantages. This account grows tax-free, and withdrawals in retirement are also tax-free.

Step 4: Go back to your 401(k) and max out your contributions to pay less taxes. Contributions are pre-tax.

Step 5: After maxing out all your tax-advantaged accounts, put your remaining money in a regular brokerage account.

Remember to save for your future-self, but to also enjoy the journey for your present-self.

📝 reThinkable Quiz

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